Talks Begin for New International Weapons Conglomerate

The European Aeronautic Defense & Space Co. and BAE Systems say they are in advanced talks for a merger of the firms.

By Scott Krane

First Publish: 9/16/2012, 10:53 AM

BAE submarine sets sail in Britain for sea trials

Reuters

The European Aeronautic Defense & Space Co. and the London-based BAE Systems PLC have said they are in advanced talks to craft a weapon manufacturing merger firm.

The proposed merger has roots in France, Britain and Germany and is being pieced together to quell various security concerns irking the U.S. Defense Department.

If the deal goes through, the largest weapons manufacturing conglomerate will thus take helm of the market, surpassing both American-based Lockheed Martin Corp. as well as Boeing Co.

Both of these companies work in conjunction with Israel Aerospace Industries to develop technology, and provide the IDF with arms. The Iron Dome missile defense system was made with 40 to 50 percent production and materials by Boeing. Should the EADS and BAE merge to become a conglomerate, the weapons manufacturing industry that sells to and works with the IDF could change.

The BAE has been more successful than any other country at selling the Pentagon supplies for cyber warfare and electronic security, according to a media dispatch.

The merger would “leave European governments with limited oversight of the combined company’s operations, posing a direct challenge to France’s tradition of keeping control of strategic industries,” The Wall Street Journal, reported.

“After the merger, several small companies could find themselves increasingly isolated on the world stage, and under pressure to deal with shrinking defense budgets across Europe,” it added.

The deal would allow special operations to maintain closer links to their government. BAE and EADS would have dual listings on stock charts.

The talks should take about another 45 days to be complete, according to a report, which caused a plunge in stocks of the two firms plunged.